Economics

Under fixed rates, which one of the following statements is the MOST a

Under fixed rates, which one of the following statements is the MOST accurate? A) Monetary policy can affect only output. B) Monetary policy can affect only employment. C) Monetary policy can affect only international reserves. D) Monetary policy can not affect international reserves. E) Monetary policy can only affect money supply.   ANSWER C

Read full post

Date: September 10th, 2020

Which of the following is a FALSE statement concerning purchasing powe

Which of the following is a FALSE statement concerning purchasing power parity? A) Purchasing power parity states that dollars will tend to exchange for pounds at a rate that maintains a constant purchasing power of a given quantity of a currency. B) Over the long term, a Big Mac in New York will tend to […]

Read full post

Date: September 10th, 2020

What is the Fisher Effect? Provide an example. What will be an ideal

What is the Fisher Effect? Provide an example. What will be an ideal response?   ANSWER All else equal, a rise in a country’s expected inflation rate will eventually cause an equal rise in the interest rate that deposits of its currency offer. Similarly, a fall in the expected inflation rate will eventually cause a […]

Read full post

Date: September 10th, 2020

Describe and explain the relationship between expected inflation rates

Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory. What will be an ideal response?   ANSWER Expected inflation is given by the following equation: Πe = (Pe – P)/P where Pe is the expected price level in a country a year […]

Read full post

Date: September 10th, 2020

Many countries in sub-Saharan Africa have very low labor productivitie

Many countries in sub-Saharan Africa have very low labor productivities in many sectors, for example in manufacturing and agriculture. They often despair of even trying to attempt to build their industries unless it is done in an autarkic context, behind protectionist walls because they do not believe they can compete with more productive industries abroad. […]

Read full post

Date: September 10th, 2020